Judgment of the Court of Appeal: the regulation that governs the revenues of electricity network companies conflicts with EU law
The Swedish Court of Appeal has today announced its ruling in the case concerning the revenue that the electricity network companies may have during the period 2020–2023.
A complex ruling, but with a clear message that the supervisory authority, Energy Market Inspectorate (Ei), must comply with EU law and ensure that electricity networks can function efficiently and reliably. It is also clear that Ei must consider the need for essential investments in the networks when deciding on permitted revenues.
Sweden is going through a dramatic wave of electrification, driven by a climate crisis that demands that we reduce emissions by replacing fossil fuels with electricity. Industry and the transport sector are electrifying at a rapid pace, and the energy industry consequently expects that Swedish electricity consumption will more than double in the next 20–25 years.
“Proportional, expanded electricity networks are absolutely crucial for societal development that is characterised by an increased need for electricity. Virtually all political targets for climate, agriculture, housing, business, transport and so on depend on replacing and modernising old electricity network infrastructure to meet their needs. This is associated with very large costs,” says David Bjurhall, Head of Regulation at Ellevio.
To realise this development, electricity network companies must invest heavily in building infrastructure that can secure the future electricity supply. The technology consulting company Sweco’s review from March this year shows that the need for investment in electricity networks alone will increase to around SEK 670 billion by 2045. Most of these investments must be made in the next 10–15 years.
“The Court of Appeal states that the current regulation governing income regulation is not compatible with EU law. It is now of utmost importance that the Energy Market Inspectorate makes a decision on permitted income that creates secure reasonable and long-term conditions for the electricity network companies to be able to realize the development demanded by customers and society,” David Bjurhall says.
The background to the case in the Court of Appeal is that most of Sweden’s electricity network companies in 2019 appealed the Energy Market Inspectorate’s decision on how large the electricity network companies' revenues should be. The case was decided in favour of the electricity network companies in the administrative court in February 2021. The Energy Market Inspectorate appealed to the Court of Appeals, which today announced its ruling. The Court of Appeal does not take a position on the level of revenue, but the Energy Market Inspectorate must now make new decisions – within the framework set by the EU’s third electricity market directive. Today’s ruling also states that the authority’s independence has been ignored, based on what is described in the EU’s third electricity market directive.
“We will now read the ruling thoroughly to understand what the Court of Appeal’s ruling means for the continued process of developing a reasonable, long-term framework that enables electricity network companies to secure the technical development and fossil-free future that citizens and decision-makers expect,” says Bjurhall.
The parties can appeal the ruling to the Supreme Administrative Court within three weeks. If the verdict is not appealed, it becomes final and the process in court is completed. The case then goes back to the Energy Market Inspectorate, which will make new decisions about the electricity network companies’ revenue limits.
Contact for media
Jesper Liveröd, Head of Press +46 70-929 96 23.